Management’s Discussion and Analysis
This section of Tennessee State University’s annual financial report presents a discussion and analysis of the financial performance of
the university during the fiscal year ended June 30, 2007, with comparative information presented for the fiscal years ended June 30,
2006 and June 30, 2005. This discussion has been prepared by management along with the financial statements and related note
disclosures and should be read in conjunction with the financial statements and notes. The financial statements, notes, and this
discussion are the responsibility of management.
Using This Annual Report
This report consists of three basic financial statements. The Statement of Net Assets; the Statement of Revenues, Expenses, and
Changes in Net Assets; and the Statement of Cash Flows provide information on Tennessee State University as a whole and present a
long-term view of the university’s finances.
The Statement of Net Assets
The Statement of Net Assets presents the financial position of the university at the end of the fiscal year and includes all assets and
liabilities of the university. The difference between total assets and total liabilities – net assets – is an indicator of the current financial
condition of the university. Assets and liabilities are generally measured using current values. One notable exception is capital assets,
which are stated at historical cost less an allowance for depreciation.
Net assets are divided into three major categories. The first category, invested in capital assets, net of related debt, provides the
university’s equity in property, plant, and equipment owned by the university. The next asset category is restricted net assets, which is
divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for
investment purposes. Expendable restricted net assets are available for expenditure by the university but must be spent for purpose.
determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category
is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution
2
Statement of Net Assets (in thousands of dollars)
2007
Assets:
Current assets
Capital assets, net
Other assets
TOTAL ASSETS
$
Liabilities
Current liabilities
Noncurrent liabilities
TOTAL LIABILITIES
Net Assets:
Invested in capital assets, net
of related debt
Restricted - Nonexpendable
Restricted - Expendable
Unrestricted
Total Net Assets
$
23,905
177,050
36,498
237,453
INSTITUTION
2006
$
2005
20,408
167,428
31,324
219,160
$
26,354
156,267
27,085
209,706
17,342
44,349
61,691
15,741
39,305
55,046
17,269
35,854
53,123
138,658
73
7,772
29,259
175,762
133,962
72
6,701
23,379
164,114
125,457
72
7,826
23,228
156,583
$
$
2007
$
$
COMPONENT UNIT
2006
3,477
$
2,519
2005
$
2,344
30,305
33,782
16,864
19,383
13,666
16,010
14
6
1
14
6
1
30,305
3,351
112
33,768
16,864
2,483
30
19,377
13,658
2,308
43
16,009
$
$
Comparison of FY 2007 to FY 2006 - TSU
•
Current Assets increased with the increase in Accounts and Grants Receivable of over $650,000 and an increase in Cash and
Cash Equivalents required to pay current obligations.
•
Capital Assets increased as the result of the purchase/construction of capital assets. See Note 5 on Capital Assets.
•
Other Assets increased with the allocation of an additional $3.5 million Cash and Cash Equivalents for future plant
construction, and an increase of over $1.3 million in Grants Receivables related to construction projects.
3
•
Current Liabilities increased with the increase in the Bonds and Notes Payable currently due and an increase in Deferred
Revenue related to student fees related to future terms. See Note 6 for additional information on Long-Term Liabilities.
•
Long Term Liabilities increased as a result of additional funding obtained for capital assets. See Note 6 for additional
information on Long-Term Liabilities.
•
Restricted-Expendable Net Assets for FY07 increased with the funding received for Consent Decree programs ($711,000) and
Biotech Labs ($749,000).
•
Unrestricted Net Assets for plant construction increased with the allocation of an additional $3.5 million for future plant
construction, and an increase of over $1.3 million in Grants Receivables related to construction projects.
Comparison of FY 2007 to FY 2006 – TSU Foundation
•
The TSU Foundation’s Current Assets, Restricted, Expendable Net Assets, and Unrestricted Net Assets increased with the
receipt of over $1.1 million in Gifts and Contributions and over $390,000 in investment income.
•
Other Assets and Restricted, Non Expendable Net Assets for the current fiscal year increased over as a result of $9 million in
state funds and over $3.3 million in Title III funding received for the Endowment for Educational Excellence, and over $1.0
million in investment gains and income.
4
Comparison of FY 2006 to FY 2005 - TSU
•
Current Assets decreased while Other Assets increased as the result of additional investments of the University and the
purchase/construction of capital assets. See Note 3 of the attached financial statements for additional information on
Investments and Note 5 on Capital Assets.
•
Current Liabilities decreased for current fiscal year as result of a decrease in the current portion due of Long Term Liabilities.
See Note 6 for additional information on Long-Term Liabilities.
•
Restricted-Expendable Net Assets for FY06 decreased 14% due to a $2.87 million refund of remaining funds following the
discontinuation of the Basic Skills - Science Materials Program.
•
Restricted-Non Expendable Net Assets for FY06 increased as a result of an endowed gift of $10,000.
Comparison of FY 2006 to FY 2005 – TSU Foundation
•
Net Assets for the TSU Foundation for the current fiscal year increased over $3.0 million as a result of $1 million in state
funds, over $1.1 million in gifts, and a more aggressive investment program that resulted in over $500 thousand in investment
income.
Many of the university’s unrestricted net assets have been designated or reserved for specific purposes such as: repairs and
replacement of equipment, future debt service, quasi-endowments, capital projects, and student loans. The following graph shows the
allocations:
5
UNRESTRICTED NET ASSETS
$12,500
$10,000
$7,500
$5,000
$2,500
$S
T
CES
ON OTHER NATED
RI E
T AL
MEN RUC TI
API MBRAN XI LI A
IG
E
C
C
U
DE S
U
ST
NG
LA
A
I
C
N
P
N
K
N
E
U
O
/
R
E
ED
WO
L & R L A NT C
ERV
WA
P
S
E
E
N
R
RE
UN
2007
2006
2005
Comparison of FY 2007 to FY 2006
•
The Allocation for Plant Construction increased as a result of construction ongoing on the Avon Williams campus and the
Clement Hall renovation.
Comparison of FY 2006 to FY 2005
•
The Allocation for Working Capital decreased 28% as the result of a decrease in students Accounts Receivable due to accounts
determined to be uncollectible.
6
The Statement of Revenues, Expenses, and Changes in Net Assets
The Statement of Revenues, Expenses, and Changes in Net Assets present the operating results of the university, as well as the
nonoperating revenues and expenses. Annual state appropriations, while budgeted for operations, are considered non-operating
revenues according to accounting principles generally accepted in the United States of America.
Statement of Revenues, Expenses, and Changes in Net Assets (in thousands of dollars)
INSTITUTION
2006
2007
Operating Revenues:
Net tuition and fees
Grants and contracts
Auxiliary
Other
Total Operating Revenue
$
Operating expenses
Operating loss
Nonoperating revenues and expenses:
State appropriations
Gifts
Grants and Contracts
Investment income
Other revenues and expenses
Total nonoperating revenues and expenses
revenues and expenses
45,241
35,794
12,864
2,736
96,635
$
45,187
30,149
12,527
2,563
90,426
2005
$
COMPONENT UNIT
2006
2007
42,272
29,361
12,410
2,429
86,472
$
1,364
1,364
161,526
(64,891)
152,883
(62,457)
151,795
(65,323)
930
434
45,387
835
16,252
2,945
(1,668)
44,939
732
14,941
1,859
(4,594)
42,305
1,121
16,922
898
(1,619)
63,751
57,877
1,097
1,097
2005
$
1,140
1,140
1,150
(53)
1,140
-
9,000
288
3,260
397
1,000
215
594
-
1,000
574
488
(5)
13
59,627
12,945
1,809
2,070
13,379
1,756
2,070
1,013
1,612
462
Income (loss) before other revenues
expenses, gains, or losses
Other revenues, expenses, gains, or losses
Capital appropriations
Capital grants and gifts
Additions to permanent endowments
Other
Total other revenues, expenses, gains, or losses
(1,140)
(4,580)
(5,696)
10,332
2,546
(90)
12,788
11,745
393
(27)
12,111
1,863
3,972
247
6,082
1,013
1,612
462
Increase (decrease) in net assets
11,648
7,531
386
14,392
3,368
2,532
Net assets at beginning of period
164,114
156,583
155,342
19,377
16,009
13,477
-
-
-
Prior Period Adjustment
Net assets at end of year
$
175,762
855
$
164,114
7
$
156,583
$
33,769
$
19,377
$
16,009
Revenues
The following is a graphic illustration of revenues by source (both operating and nonoperating), which are used to fund the
university’s operating activities for the years ended June 30, 2007, June 30, 2006, and June 30, 2005 (amounts are presented in
thousands of dollars).
REVENUES
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$-
2007
2006
es
Fe
ns
ns
s es
cts
tio
tio
tra
p ri
a
a
r
n
i
i
&
e
r
r
o
t
n
C
ro p
En
ro p
itio
pp
pp
ry
s&
t
a
Tu
A
A
i
n
l
a
te
xil
ita
Gr
Sta
Au
ap
vt
C
o
G
8
h er
Ot
2005
TSU Foundation Revenues
2007
2006
Other nonoperating
revenues/(expe
nses)
Grants and
contracts
State
appropriations
Contributions
$10,000
$8,000
$6,000
$4,000
$2,000
$-
2005
Comparison of FY 2007 to FY 2006 - TSU
•
Grants and Contracts for the University increased due to an additional $2.0 million for construction related programs, $1.3
million for Pell, SEOG, Hope, and TSAC grants, and over $3.2 million in Title III funds for the match of the funds related to
the Consent Decree settlement.
•
Capital Appropriations decreased 49% with a $5.5 decline in expenses in FY08 for the Avon Williams Campus renovation as
the project neared completion.
Comparison of FY 2007 to FY 2006 – TSU Foundation
•
State Appropriations for the Foundation increased $8.0 and Grants and Contracts increased over $3.2 million due to funds
received from the Consent Decree settlement.
9
Comparison of FY 2006 to FY 2005
•
Net Tuition and Fees increased $2.9 million as the result of an increase in the cost of attendance.
•
Gifts for the University decreased 35% due to a decrease in funds received from non-governmental organizations.
•
Investment income increased as a result of more funds invested for the entire fiscal year and a more aggressive investment
strategy employed by the university.
•
Other non-operating revenues/expenses decreased due to the discontinuation of the Science Materials Program in Basic Skills
and the allocation of the remaining funds to the participating counties.
Comparison of FY 2006 to FY 2005 – TSU Foundation
•
Additions to the Permanent fund increased in 2006 for the TSU Foundation as a result of a more aggressive investment
strategy employed by the by the foundation.
Expenses
Operating expenses can be displayed in two formats, natural classification and program classification. Both formats are displayed
below.
10
NATURAL CLASSIFICATION
(in thousands of dollars)
UNIVERSITY
2006
2007
SALARIES
BENEFITS
OPERATING
SCHOLARSHIPS
PAYMENTS TO TSU
DEPRECIATION
$
TOTAL
$
72,162
22,366
53,378
5,364
8,256
$
161,526
$
2005
2007
70,950 $
21,342
46,131
6,422
8,038
69,316
20,458
47,785
6,554
7,682
152,883 $
151,795
COMPONENT UNITS
2006
$
464
606
80
-
$
463
652
25
-
$
1,150
$
1,140
510
363
57
$
930
2005
NATURAL CLASSIFICATION
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
2007
$20,000
2006
$10,000
2005
$-
N
G
TS
IPS
IE S
TIO
T IN
SH
EFI
AR
A
R
A
N
L
I
R
E
E
LA
B
SA
EC
OP
HO
PR
SC
DE
11
TSU FOUNDATION EXPENDITURES
$1,000
$800
$600
2007
2006
2005
$400
$200
$Operating Expenses
Scholarships and fellow ships
Payments to Tennessee State
University
Comparison of FY 2007 to FY 2006 - TSU
•
Salaries increased with the implementation of the university salary plan.
•
Operating expenditures increased as noted above with the increase in Grant and Contract expenditures including Title III
funding, and Pell, SEOG, Hope, and TSAC grants.
Comparison of FY 2007 to FY 2006 – TSU Foundation
•
Operating Expenses increased and payments to TSU decreased due to payments on behalf of the University were made through
the Foundation rather than transferring the funding to the University.
•
Scholarship expenditures decreased due to a hold being placed on the awarding of new scholarships as a result of several
changes in the Foundation Board membership.
12
Comparison of FY 2006 to FY 2005 - TSU
•
Scholarships decreased due to the number of students receiving Pell, Hope, and TSAC awards.
Comparison of FY 2006 to FY 2005 - TSU Foundation
•
Payments to TSU increased to support from for one-time expenses related to the installation of a new president for the
University.
PROGRAM CLASSIFICATION
(in thousands of dollars)
2007
INSTRUCTION
RESEARCH
PUBLIC SERVICE
ACADEMIC SUPPORT
STUDENT SERVICES
INSTITUTIONAL SUPPORT
MAINTENANCE AND OPERATION
SCHOLARSHIPS
AUXILIARY
DEPRECIATION
$
59,327
10,615
6,873
10,803
14,871
16,386
14,391
9,459
10,545
8,256
TOTAL
$
161,526
13
UNIVERSITY
2006
$
2005
57,827
12,934
6,378
11,237
15,369
14,445
9,873
6,350
10,432
8,038
$
56,008
12,778
6,659
10,740
14,206
14,334
9,747
9,475
10,166
7,682
$ 152,883
$
151,795
PROGRAM CLASSIFICATION
$60,000
$50,000
$40,000
2007
$30,000
2006
$20,000
2005
$10,000
$-
Comparison of FY 2007 to FY 2006
•
Research decreased as a result of the reduction in funding from NASA and NSF.
•
Institutional Support increased with the Title III expenditures noted above.
•
Scholarships increased due to the number of students receiving Pell, SEOG, Hope, and TSAC awards.
14
•
Maintenance and Operations increased due to an increase utilities and an increase in non-capital expenditures for maintenance
and repairs of University property.
Comparison of FY 2006 to FY 2005
•
Scholarships decreased due to the number of students receiving Pell, Hope, and TSAC awards.
The Statement of Cash Flows
The Statement of Cash Flows provides information about cash receipts and cash payments during the year. This statement also assists
users in assessing the university’s ability to generate net cash flows, its ability to meet its obligations as they come due, and its need
for external financing.
Statement of Cash Flows (in thousands of dollars)
UNIVERSITY
2006
2007
Cash provided (used) by:
Operating activities
Noncapital financing activities
Capital and related financing activities
Investing activities
Net increase (decrease) in cash
Cash, beginning of year
Cash, end of year
$
$
(55,755)
62,472
(3,108)
3,144
6,753
27,606
34,359
15
$
$
(53,044)
57,639
(4,167)
(690)
(262)
27,868
27,606
2005
$
$
(56,789)
60,916
(7,702)
(9,198)
(12,773)
40,641
27,868
Comparison of FY 2007 to FY 2006
•
Cash provided by investing activities increased as a result of more funds invested for the entire fiscal year.
•
Cash provided from Non-capital financing activities increased with the additional receipt of Grants and Contracts as noted
above.
•
Cash provided by Capital and related financing activities for the University increased for FY07 due to an increase in the
proceeds from capital debt.
•
The university’s liquidity improved during the year.
Comparison of FY 2006 to FY 2005
•
Cash provided by investing activities increased as a result of more funds invested for the entire fiscal year, rather than the
purchase of investments during the year, at higher rates and a more aggressive investment strategy employed by the university.
•
Cash provided by Capital and related financing activities for the University decreased for FY06 due to a $3.2 million purchase
of capital assets and construction costs for FY05 not required during FY06.
Capital Assets and Debt Administration
Capital Assets
The university had $177,049,621.73 invested in capital assets, net of accumulated depreciation of $123,522,576.24 at June 30, 2007;
$167,428,129.41 invested in capital assets, net of accumulated depreciation of $116,307,677.28 at June 30, 2006; and
$156,267,304.33 invested in capital assets, net of accumulated depreciation of $109,470,607.53 at June 30, 2005. Depreciation
charges totaled $8,256,427.97, $8,037,721.55, and $7,681,782.97 for the years ended June 30, 2007, June 30, 2006, and June 30,
2005, respectively. Details of these assets are shown below.
16
Schedule of Capital Assets, Net of Depreciation (in thousands of dollars)
Land
Land Improvements
Buildings
Equipment
Library Holdings
Software
Projects In Progress
Net Capital Assets
$
$
2007
9,525
11,147
88,372
6,037
7,121
2,048
52,800
177,050
$
$
2006
9,525
11,543
91,498
6,351
7,285
41,226
167,428
$
$
2005
9,525
22,420
85,218
6,356
6,567
26,181
156,267
Projects in progress during the fiscal year 2007 included the Research and Sponsored Programs building, the renovation of the Avon
Williams campus, installation of fire sprinkler systems in student housing, and continued work on the final phase of the North Campus
project. More detailed information about the university’s capital assets is presented in Note 5 to the financial statements.
Debt
The university had $38,392,019.02, $33,465,760.10, and $30,180,464.64 in debt outstanding at June 30, 2007, June 30, 2006, and
June 30, 2005, respectively. The table below summarizes these amounts by type of debt instrument.
17
Schedule of Debt (in thousands of dollars)
Bonds
Commerical Paper
Total
$
$
2007
37,467
925
38,392
$
$
2006
29,419
4,047
33,466
$
$
2005
28,269
2,542
30,811
The university converted over $4.0 million in Commercial Paper to Bonds during FY07 for the Research and Sponsored Programs
building, and the Student Housing Fire Suppression retrofit project. An additional amount of over $924 thousand was issued in
Commercial Paper for these two projects and the Avon Williams Campus renovation. Over $8 million in Bonds were issued during
the current fiscal year. Additional information about the university’s long-term liabilities is presented in Note 6 to the financial
statements. The Standard & Poor’s rating for TSSBA AA- with a stable outlook. More detailed information about the university’s
long-term liabilities is presented in Note 6 to the financial statements.
Economic Factors That Will Affect the Future
The Tennessee Board of Regents approved a 6.0% increase in maintenance and tuition fees for the 2007-08 academic year. The cost
for students to attend the university exceeds the amount of financial aid available per student. This requires students to resort to
alternative means of financing the cost of attending the university. The impact that will have on enrollment is unknown. The
university is not aware of any other factors that will have a significant affect on the financial position or results of operations.
18
Requests for Information
This financial report is designed to provide a general overview of the institution’s finances for all those with an interest in the
university’s finances. Questions concerning any of the information provided in this report or requests for additional financial
information should be directed to:
Mrs. Cynthia B. Brooks
Vice President for Business and Finance
3500 John A. Merritt Boulevard
Nashville, TN 37209
19
Tennessee State University
Unaudited Statement of Net Assets
June 30, 2007, with comparative figures at June 30, 2006
Institution
FY 2007
ASSETS
Current assets:
Cash and cash equivalents (Note 2 and 15)
Short-term investments (Note 3)
Accounts, notes, and grants receivable (net) (Note 4)
Inventories (at lower of cost or market)
Accrued interest receivable
Total current assets
Noncurrent assets:
Cash and cash equivalents (Note 2 and 15)
Investments (Note 3 and 15)
Accounts, notes, and grants receivable (net) (Note 4)
Capital assets (net) (Note 5 )
Total noncurrent assets
Total assets
LIABILITIES
Current liabilities:
Accounts payable
Accrued liabilities
Student deposits
Deferred revenue
Compensated absences (Note 6 )
Accrued interest payable
Long-term liabilities, current portion (Note 6 )
Deposits held in custody for others
Other liabilities
Total current liabilities
Noncurrent liabilities:
Compensated absences (Note 6 )
Long-term liabilities (Note 6 )
Due to grantors (Note 6 )
Total noncurrent liabilities
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted for:
Nonexpendable:
Scholarships and fellowships
$
$
$
14,036,969.71
300,806.56
7,928,930.13
38,816.27
1,599,059.94
23,904,582.61
20,322,583.08
12,148,236.94
4,028,515.74
177,049,621.73
213,548,957.49
237,453,540.10
Component Unit
FY 2007
FY 2006
FY 2006
$
$
11,264,067.79
285,697.70
7,277,958.06
38,816.27
1,542,094.12
20,408,633.94
16,342,093.10
12,419,992.60
2,561,185.79
167,428,129.41
198,751,400.90
219,160,034.84
$
$
3,477,411.44
3,477,411.44
2,417,659.95
27,887,545.15
30,305,205.10
33,782,616.54
$
$
2,518,261.65
2,518,261.65
5,678,425.86
11,185,974.75
16,864,400.61
19,382,662.26
2,094,231.71
7,775,578.01
1,253,844.41
2,814,922.08
759,669.43
308,110.31
1,584,504.95
121,724.96
629,581.50
17,342,167.36
1,664,317.05
7,265,186.76
1,164,654.91
2,505,815.36
1,260,185.75
266,438.69
1,044,550.13
114,731.40
455,440.36
15,741,320.41
13,835.77
13,835.77
5,655.05
5,655.05
4,305,123.55
36,807,514.07
3,236,570.55
44,349,208.17
61,691,375.53
3,586,088.73
32,421,209.97
3,297,205.01
39,304,503.71
55,045,824.12
13,835.77
5,655.05
$
138,657,602.71
133,962,369.31
73,306.98
19
72,592.10
$
-
30,305,205.10
$
-
16,864,211.13
Tennessee State University
Unaudited Statement of Net Assets
June 30, 2007, with comparative figures at June 30, 2006
Institution
FY 2007
Expendable:
Scholarships and fellowships
Research
Instructional department uses
Loans
Other
Unrestricted (Note 8 )
Total net assets
$
Component Unit
FY 2007
FY 2006
FY 2006
483,509.10
1,988,247.65
2,529,622.21
854,346.59
1,916,756.49
29,258,772.84
175,762,164.57
The notes to the financial statements are integral part of this statement.
20
$
374,746.07
899,429.29
2,034,511.94
866,070.58
2,525,237.15
23,379,254.28
164,114,210.72
2,328,068.76
13,955.72
126,403.43
$
882,263.62
112,884.14
33,768,780.77
$
1,820,549.78
15,804.41
83,372.33
563,312.74
29,756.82
19,377,007.21
Tennessee State University
Unaudited Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended June 30, 2007, with comparative figures for the year ended June 30, 2006
Institution
FY 2007
REVENUES
Operating revenues:
Student tuition and fees ( net of scholarship
allowances of
for the year ended June 30, 2007, and
for the year ended June 30, 2006.)
Gifts and contributions
Governmental grants and contracts
Sales and services of educational departments
Auxiliary enterprises:
Residential life ( net of scholarship
allowances of
for the year ended June 30, 2007, and
for the year ended June 30, 2006: all residential life revenues are
used as security for revenue bonds, see Note __ )
Bookstore
Food service
Other auxiliaries
Other operating revenues
Total operating revenues
$ 15,295,706.40
$ 14,660,467.90
$ 45,241,297.78
35,793,622.54
2,412,523.66
$
$
7,310,730.94
253,153.05
4,359,190.13
940,604.44
323,557.68
$ 96,634,680.22
$ 72,161,355.65
22,366,172.57
53,378,073.75
5,364,261.32
8,256,427.97
161,526,291.26
$ (64,891,611.04)
$
$
$
45,186,600.61
30,149,197.69
2,309,304.96
1,171,729.51
-
918,706.15
-
7,080,737.00
121,209.88
4,396,311.33
928,306.27
254,367.01
90,426,034.75
191,920.79
1,363,650.30
178,318.08
$ 1,097,024.23
1,070,809.63
1,007,641.08
EXPENSES
Operating Expenses
Salaries and wages
Benefits
Utilities, supplies, and other services
Scholarships and fellowships
Depreciation expense
Payments to or on behalf of TSU
Total operating expenses
Operating income (loss)
NONOPERATING REVENUES (EXPENSES)
State appropriations
Gifts, including
from component unit(s) to institution in FY 2007 and
in FY 2006
Grants and contracts
Investment income
Interest on capital asset-related debt
Bond issuance costs
Other non-operating revenues/(expenses)
Net nonoperating revenues
Income before other revenues, expenses
gains, or losses
Capital appropriations
Capital grants and gifts
Additions to permanent endowments
Other capital
Total other revenues
Component Unit
FY 2007
FY 2006
FY 2006
$
$
70,949,834.64
21,342,128.61
46,131,518.71
6,421,738.06
8,037,721.55
152,882,941.57
$ (62,456,906.82)
$
$
$
509,701.09
362,724.30
57,185.42
929,610.81
434,039.49
$
464,165.10
605,975.24
80,102.97
1,150,243.31
$
(53,219.08)
45,386,666.74
44,938,933.87
9,000,000.00
1,000,000.00
835,127.83
16,252,413.70
2,944,671.35
(1,667,656.91)
63,751,222.71
732,285.22
14,941,384.15
1,859,101.23
(1,547,735.93)
(76,628.77)
(2,970,425.50)
57,876,914.27
288,401.94
3,259,354.58
397,328.41
12,945,084.93
214,669.78
593,564.34
1,808,234.12
(1,140,388.33)
10,332,279.54
2,545,930.86
(89,868.22)
12,788,342.18
(4,579,992.55)
11,745,123.83
393,237.83
(27,504.64)
12,110,857.02
13,379,124.42
-
1,755,015.04
-
1,012,649.14
1,012,649.14
1,612,268.77
1,612,268.77
57,185.42
80,102.97
21
Tennessee State University
Unaudited Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended June 30, 2007, with comparative figures for the year ended June 30, 2006
Increase (decrease) in net assets
NET ASSETS
Net Assets -beginning of year
Prior period adjustment (Note ___ )
Net Assets - end of year
The notes to the financial statements are integral part of this statement.
22
Institution
FY 2007
FY 2006
$ 11,647,953.85
$
7,530,864.47
Component Unit
FY 2007
FY 2006
$ 14,391,773.56
$ 3,367,283.81
$ 164,114,210.72
$ 175,762,164.57
$ 19,377,007.21
$ 33,768,780.77
$ 156,583,346.25
$ 164,114,210.72
$ 16,009,723.40
$ 19,377,007.21
Tennessee State University
Unaudited Statement of Cash Flows
for the Year Ended June 30, 2007, with comparative figures for the year ended June 30, 2006
Institution
FY 2007
FY 2006
CASH FLOWS FROM OPERATING ACTIVITIES
Tuition and fees
Grants and contracts
Sales and services of educational activities
Collection from patient charges
Payments to suppliers and vendors
Payments to employees
Payments for benefits
Payments for scholarships and fellowships
Loans issued to students and employees
Collection of loans from students and employees
Interest earned on loans to students
Auxiliary enterprise charges:
Residence halls
Bookstore
Food services
Other auxiliaries
Other receipts (payments)
$
45,946,335.16
34,356,923.18
2,443,062.29
(52,926,858.72)
(71,274,587.45)
(22,346,141.09)
(5,364,261.32)
(772,968.46)
748,827.89
64,201.30
$
7,508,126.27
253,153.05
4,359,190.13
926,460.94
323,557.68
Net cash provided (used) by operating activities
45,891,904.66
31,948,236.79
2,239,333.69
(48,039,830.10)
(70,399,090.36)
(21,322,097.13)
(6,421,738.06)
(693,851.68)
762,524.01
74,918.30
7,259,465.24
121,209.88
4,396,311.33
884,012.20
254,367.01
$
(55,754,979.15)
$
(53,044,324.22)
$
45,377,366.74
$
44,934,133.87
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES
State appropriations
Gifts and grants received for other than capital
or endowment purposes, including
$
57,185.42
80,102.97
from component unit to the institution for FY 2007 and $
from component unit to the institution for FY 2006
Federal student loan receipts
Federal student loan disbursements
Changes in deposits held for others
Other non-capital financing receipts (payments)
Net cash provided (used) by non-capital
financing activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Proceeds from capital debt
Capital - state appropriation
Capital grants and gifts received, including
from (component unit) for FY 2007 and
for FY 2006
Proceeds from sale of capital assets
Purchase of capital assets and construction
Principal paid on capital debt and lease
$
$
17,087,541.53
26,261.00
(26,261.00)
6,993.56
-
15,644,567.37
1,577,025.81
(1,547,923.81)
1,997.45
(2,970,425.50)
$
62,471,901.83
$
57,639,375.19
$
10,466,607.66
10,332,279.54
$
6,236,150.86
11,745,123.83
1,231,101.02
(17,978,252.44)
(5,529,884.81)
23
1,348,957.37
(18,241,365.10)
(3,657,484.17)
Tennessee State University
Unaudited Statement of Cash Flows
for the Year Ended June 30, 2007, with comparative figures for the year ended June 30, 2006
Institution
FY 2007
(1,629,734.08)
-
Interest paid on capital debt and lease
Bond issue costs paid on new debt issue
Other capital and related financing receipts (payments)
Net cash provided (used) by capital and
related financing activities
FY 2006
(1,517,946.64)
(86,809.47)
6,201.24
$
(3,107,883.11)
$
(4,167,172.08)
$
5,514,394.32
2,887,705.53
(5,257,747.52)
$
5,038,994.62
1,201,640.96
(6,930,949.99)
$
3,144,352.33
$
(690,314.41)
$
6,753,391.90
27,606,160.89
34,359,552.79
$
(262,435.52)
27,868,596.41
27,606,160.89
$
(64,891,611.04)
$
(62,456,906.82)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales and maturities of investments
Income on investments
Purchase of investments
Net cash provided (used) by investing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents - beginning of year
Cash and cash equivalents - end of year (Note 2)
RECONCILIATION OF OPERATING INCOME/(LOSS) TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES
Operating income/(loss)
Adjustments to reconcile operating loss to net cash
provided (used) by operating activities
Depreciation expense
Change in assets and liabilities:
Receivables, net
Inventories
Accounts payable
Accrued liabilities
Deferred revenues
Deposits
Compensated absences
Loans to students and employees
Net cash provided (used) by operating activities
$
Non-cash transactions
Gifts in-kind
Unrealized gains/losses on investments
Loss on disposal of capital assets
Trade-in allowance
8,256,427.97
8,037,721.55
(652,067.65)
429,914.66
627,646.72
309,106.72
89,189.50
218,518.50
(142,104.53)
(55,754,979.15)
2,507,340.63
76.06
(1,626,276.51)
334,305.34
(129,551.31)
87,445.00
248,065.61
(46,543.77)
(53,044,324.22)
36,948.26
24
$
4,559.66
(582,376.62)
(35,296.44)
10,550.00
-
TENNESSEE STATE UNIVERSITY
Notes to the Financial Statements
June 30, 2007
1.
Summary of Significant Accounting Policies
REPORTING ENTITY
The university is a part of the State University and Community College System of Tennessee (Tennessee Board of Regents). This system is a component unit of the
State of Tennessee because the state appoints a majority of the system’s governing body and provides financial support; the system is discretely presented in the
Tennessee Comprehensive Annual Financial Report.
The Tennessee State University Foundation is considered a component unit of the university. Although the university does not control the timing or amount of receipts
from the foundation, the majority of resources, or income thereon, that the foundation holds and invests are restricted to the activities of the university by the donors.
Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the
university and is discretely presented in the university’s financial statements. See Note 15 for more detailed information about the component unit and how to obtain
the report.
BASIS OF PRESENTATION
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applicable to governmental
colleges and universities engaged in business-type activities as prescribed by the Governmental Accounting Standards Board (GASB).
BASIS OF ACCOUNTING
For financial statement purposes, the university is considered a special-purpose government engaged only in business-type activities. Accordingly, the financial
statements have been prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and
expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all
eligibility requirements imposed by the provider have been met. All significant inter-fund transactions have been eliminated.
Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed to the extent that those standards do not conflict
with or contradict guidance of the Governmental Accounting Standards Board (GASB). The university has the option of following private-sector guidance issued
subsequent to November 30, 1989, subject to the above limitation. The university has elected not to follow private-sector guidance issued subsequent to November 30,
1989.
Amounts reported as operating revenues include: 1) tuition and fees, net of waivers and discounts, 2) federal, state, local and private grants and contracts, 3) sales and
services of auxiliary enterprises, and 4) other sources of revenue. Operating expenses for the university include: 1) salaries and wages, 2) employee benefits, 3)
scholarships and fellowships, 4) depreciation, and 5) utilities, supplies, and other services.
25
All other activity is nonoperating in nature. This activity includes: 1) state appropriations for operations, 2) investment income, 3) bond issuance costs, 4) interest on
capital asset-related debt, and 5) gifts and non-exchange transactions.
When both restricted and unrestricted resources are available for use, generally it is the university’s policy to use restricted resources first.
CASH EQUIVALENTS
This classification includes instruments that are readily convertible to known amounts of cash and have original maturities of three months or less.
INVENTORIES
Inventories are valued at the lower of cost or market. All other items are maintained on an average cost or first-in, first-out basis.
COMPENSATED ABSENCES
The university’s employees accrue annual leave at varying rates, depending upon length of service or classification. Some employees also earn compensatory time.
The amount of these liabilities and their related benefits are reported in the Statement of Net Assets.
CAPITAL ASSETS
Capital assets, which include property, plant, equipment, library holdings, and software, are reported in the Statement of Net Assets at historical cost or at fair value at
date of donation, less accumulated depreciation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the assets’
useful lives are not capitalized.
A capitalization threshold of $100,000 is used for buildings, and $50,000 is used for infrastructure. Equipment is capitalized when the unit acquisition cost is $5,000 or
greater. The capitalization threshold for additions and improvements to buildings and land is set at $50,000. The capitalization threshold for software is set at
$100,000.
These assets, with the exception of land, are depreciated/amortized using the straight-line method over the estimated useful lives of the assets, which range from 5 to 40
years.
NET ASSETS
The university’s net assets are classified as follows:
INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT: This represents the university’s total investment in capital assets, net of outstanding debt obligations
related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in
capital assets, net of related debt.
26
RESTRICTED NET ASSETS – NONEXPENDABLE: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other
outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of
producing present and future income, which may be expendable or added to principal.
RESTRICTED NET ASSETS – EXPENDABLE: Restricted expendable net assets include resources in which the university is legally or contractually obligated to
spend resources in accordance with restrictions imposed by external third parties.
UNRESTRICTED NET ASSETS: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of
educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the university, and
may be used at the discretion of the university to meet current expenses for any purpose. The auxiliary enterprises are substantially self-supporting activities that
provide services for students, faculty, and staff.
SCHOLARSHIP DISCOUNTS AND ALLOWANCES
Student tuition and fee revenues, and certain other revenues from students, are reported net of scholarship discount and allowances in the statement of revenues,
expenses, and changes in net assets. Scholarship discounts and allowances are the difference between the stated charge for goods and services provided by the
university, and the amount that is paid by the student and/or third parties making payments on the students’ behalf. Certain governmental grants, such as Pell grants,
and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the university’s financial statements. To the extent
that revenues from such programs are used to satisfy tuition and fees and other student charges, the university has recorded a scholarship discount and allowance.
2.
Cash
This classification includes demand deposits and petty cash on hand. At June 30, 2007, cash consists of $24,572,309.59 in bank accounts, $5,550.00 of petty cash on
hand, $9,448,865.07 in the State of Tennessee Local Government Investment Pool administered by the State Treasurer, $332,828.13 in the LGIP Deposits – Capital
Projects account. At June 30, 2006, cash consists of $16,172,091.52 in bank accounts, $4,550.00 of petty cash on hand, $10,942,639.01 in the State of Tennessee
Local Government Investment Pool administered by the State Treasurer, $486,880.36 in the LGIP Deposits – Capital Projects account.
LGIP Deposits – Capital Projects - Payments related to the university’s capital projects are made by the State of Tennessee’s Department of Finance and
Administration. The university’s estimated local share of the cost of each project is held in a separate Local Government Investment Pool (LGIP) account. As expenses
are incurred, funds are withdrawn from the LGIP account by the Tennessee Board of Regents and transferred to the Department of Finance and Administration. The
funds in the account are not available to the university for any other purpose until the project is completed and the Tennessee Board of Regents releases any remaining
funds.
27
3.
Investments
All investments permitted to be reported at fair value under GASB Statement 31 are reported at fair value, including those with a maturity date of one year or less at the
time of purchase.
As of June 30, 2007, the university had the following investments and maturities.
Investment Maturities (In Years)
Investment Type
US Agencies
Certificates of Deposit
Fair Value
$ 12,075,951.27
373,092.23
Less than 1
Total
$ 12,449,043.50 $ 373,092.23 $
$
1 to 5
11,589,300.22
6 to 10
More than 10
$ 486,651.05
No
Maturity
Date
373,092.23
11,589,300.22 $
-
$ 486,651.05 $
-
As of June 30, 2006, the university had the following investments and maturities.
Investment Maturities (In Years)
Investment Type
US Agencies
Certificates of Deposit
Fair Value
$ 12,348,569.00
357,121.30
Less than 1
Total
$ 12,705,690.30 $
-
More than
10
$
1 to 5
6 to 10
12,233,742.00 $ 114,827.00
357,121.30
$
12,590,863.30 $ 114,827.00 $
-
No
Maturity
Date
$
-
Interest Rate Risk. Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of a debt investment. The university does not have a
formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.
Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University is authorized by statute to invest
funds in accordance with Tennessee Board of Regents policies. Under the current policy, funds other than endowments may be invested only in obligations of the
United States or its agencies which are backed by the full faith and credit of the United States, repurchase agreements for United States securities, certificates of deposit
in banks and savings and loan associations, banker's acceptances, commercial paper, money market mutual funds and the State of Tennessee Local Government
Investment Pool. The policy requires that investments of endowments in equity securities be limited to funds from private gifts or other sources external to the
28
university and that endowment investments be prudently diversified. Securities are rated using Standard and Poor’s, Moody’s, and/or Fitch’s and are presented below
using the Standard and Poor’s rating scale. TBR policy restricts investments in banker’s acceptances and commercial paper. The policy requires that prime banker’s
acceptances must be issued by domestic banks with a minimum AA rating or foreign banks with a AAA long-term debt rating by a majority of the rating services that
have rated the issuer. The policy further requires that commercial paper must be issued by corporations with a minimum rating of A1 or equivalent as provided by a
majority of the rating services that rate the issuer. If there is no long-term debt rating, the short-term debt must be rated A1 by all rating services (minimum of two).
Commercial paper of a banking institution must not be purchased.
As of June 30, 2007, the university’s investments were rated as follows:
Credit Quality Rating
Investment Type
Local Government
Investment Pool (LGIP)
US Agencies
Total
Fair Value
AAA
$
9,781,693.20
$
12,075,951.27
12,075,951.27
$ 21,857,644.47 $ 12,075,951.27 $
Unrated
9,781,693.20
9,781,693.20
As of June 30, 2006, the university’s investments were rated as follows:
Credit Quality Rating
Investment Type
Local Government
Investment Pool (LGIP)
US Agencies
Total
Fair Value
AAA
$ 11,429,519.37
$
12,348,569.00
12,348,569.00
$ 23,778,088.37 $ 12,348,569.00 $
Unrated
11,429,519.37
11,429,519.37
29
4.
Accounts, Notes, and Grants Receivable
Accounts receivable included the following:
June 30, 2007
Student accounts receivable
$
June 30, 2006
3,259,714.81
$
3,690,275.10
Grants receivable
5,708,777.86
4,536,178.59
Notes receivable
455,531.10
453,223.89
State appropriation receivable
161,700.00
152,400.00
2,548,657.92
1,447,618.54
Subtotal
12,134,381.69
10,279,696.12
Less allowance for doubtful accounts
(2,262,265.32)
(2,373,100.86)
Other receivables
Total
$
9,872,116.37
$
7,906,595.26
Federal Perkins Loan Program funds include the following:
June 30, 2007
June 30, 2006
Perkins Loans receivable
Less allowance for doubtful accounts
$
17,621,887.84
(15,536,558.34)
$
16,764,606.84
(14,832,058.25)
Total
$
2,085,329.50
$
1,932,548.59
30
5.
Capital Assets
Capital asset activity for the year ended June 30, 2007, was as follows:
Beg. Balance
Land
Land Improvement & Infrastructure
Buildings
Equipment
Library Holdings
Software
Projects in progress
Total
$
Less Accumulative Depreciation:
Land improvement & infrastructure
Buildings
Equipment
Software
Library Holdings
Total Accum. Depreciation
Capital assets, net
$
Additions
9,525,009.24
38,237,355.27
158,983,760.45
23,974,140.82
11,789,910.08
41,225,630.83
283,735,806.69
15,769,437.18
17,978,252.44
26,694,738.18
67,485,145.61
17,622,942.41
4,504,851.08
116,307,677.28
396,213.46
4,615,648.18
1,765,841.97
227,574.19
1,291,753.14
8,297,030.94
167,428,129.41
$ 9,681,221.50
Transfers
Reductions
End Balance
$
1,489,164.19
430,400.00
1,081,194.03
1,127,621.23
31
(623,608.23)
(518,252.93)
2,275,741.87
(4,195,306.06)
-
(1,141,861.16)
27,090,951.64
72,100,793.79
18,824,905.33
227,574.19
5,278,351.29
123,522,576.24
(563,879.05)
(518,252.93)
(1,082,131.98)
$
-
$
(59,729.18)
9,525,009.24
38,237,355.27
160,472,924.64
24,862,126.62
12,399,278.38
2,275,741.87
52,799,761.95
300,572,197.97
$
177,049,621.73
Capital asset activity for the year ended June 30, 2006, was as follows:
Beg. Balance
Land
Land Improvement & Infrastructure
Buildings
Equipment
Library Holdings
Projects in progress
Total
Less Accumulative Depreciation:
Land improvement & infrastructure
Buildings
Equipment
Library Holdings
Total Accum. Depreciation
Capital assets, net
$
9,525,009.24
47,947,089.44
148,799,026.27
23,013,775.35
10,271,891.61
26,181,119.95
265,737,911.86
Additions
$
(10,184,734.17)
10,184,734.18
1,785,707.58
1,939,174.60
15,519,510.88
19,244,393.07
25,527,169.73
63,580,937.98
16,657,599.24
3,704,900.58
109,470,607.53
1,167,568.45
3,904,207.63
1,744,838.84
1,221,106.63
8,037,721.55
$ 156,267,304.33
$ 11,206,671.52
32
Transfers
$
475,000.00
Reductions
$
-
End Balance
$
(1,246,498.24)
9,525,009.24
38,237,355.27
158,983,760.45
23,974,140.82
11,789,910.08
41,225,630.83
283,735,806.69
(779,495.67)
(421,156.13)
(1,200,651.80)
26,694,738.18
67,485,145.61
17,622,942.41
4,504,851.08
116,307,677.28
(825,342.11)
(421,156.13)
(475,000.00)
-
-
$
-
$
(45,846.44)
$
167,428,129.41
6.
Long-term Liabilities
Long term liability activity for the year ended June 30, 2007, was as follows:
Beg. Balance
Payables:
TSSBA debt:
Bonds
Commercial Paper
$
Subtotal
29,418,510.79
4,047,249.31
Additions
$
Reductions
9,531,429.02
924,714.71
$
(1,482,635.50)
(4,047,249.31)
End Balance
$
37,467,304.31
924,714.71
Curr. Portion
$
1,584,504.95
33,465,760.10
10,456,143.73
(5,529,884.81)
38,392,019.02
1,584,504.95
4,846,274.48
3,297,205.01
2,898,211.61
166,401.26
(2,679,693.11)
(227,035.72)
5,064,792.98
3,236,570.55
759,669.43
8,143,479.49
3,064,612.87
(2,906,728.83)
8,301,363.53
759,669.43
Other Liabilities
Compensated Absences
Due to Grantor
Subtotal
Total Long-term Liabilities
$
41,609,239.59
$
13,520,756.60
33
$
(8,436,613.64)
$
46,693,382.55
$
2,344,174.38
Long term liability activity for the year ended June 30, 2006, was as follows:
Beg. Balance
Payables:
TSSBA debt:
Bonds
Commercial Paper
$
Subtotal
28,268,727.57
2,541,737.07
Additions
$
Reductions
2,676,142.83
3,636,636.80
$
(1,526,359.61)
(2,131,124.56)
End Balance
$
Curr. Portion
29,418,510.79
4,047,249.31
$ 1,044,550.13
30,810,464.64
6,312,779.63
(3,657,484.17)
33,465,760.10
1,044,550.13
4,598,208.87
2,962,319.94
1,916,862.61
355,920.49
(1,668,797.00)
(21,035.42)
4,846,274.48
3,297,205.01
1,260,185.75
7,560,528.81
2,272,783.10
(1,689,832.42)
8,143,479.49
1,260,185.75
41,609,239.59
$ 2,304,735.88
Other Liabilities
Compensated Absences
Due to Grantor
Subtotal
Total Long-term Liabilities
$
38,370,993.45
$
8,585,562.73
$
(5,347,316.59)
$
TSSBA Debt - Bonds Payable
Bond, with interest rates ranging from 4.00% to 6.90%, were issued by the Tennessee State School Bond Authority. The bonds are due serially until 2032 and are
secured by pledges of the facilities’ revenues to which they relate and certain other revenues and fees of the university, including state appropriations. The bonded
indebtedness with the Tennessee State School Bond Authority included in long-term liabilities on the Statement of Net Assets is shown net of assets held by the
authority in the debt service reserve and net of unexpended debt proceeds. The reserve amount was $275,000.00 at June 30, 2007, and $547,480.00 at June 30, 2006.
Unexpended debt proceeds were $ 32,484.44 at June 30, 2007 and $218,875.44 at June 30, 2006.
34
Debt service requirements to maturity for the university’s portion of TSSBA bonds at June 30, 2007, are as follows:
Principal
2008
2009
2010
2011
2012
2013 - 2017
2018 - 2022
2023 - 2027
2028 -2032
Total
$
$
1,584,504.95
1,675,815.87
1,450,867.78
1,860,795.34
1,949,808.30
10,295,433.97
8,389,466.10
7,352,734.20
2,907,877.80
37,467,304.31
Interest
$
1,805,190.42
1,759,556.84
1,712,090.23
1,595,883.64
1,516,529.97
6,203,947.56
3,867,852.37
1,831,804.68
380,974.41
20,673,830.12
Total
$
$
3,389,695.37
3,435,372.71
3,162,958.01
3,456,678.98
3,466,338.27
16,499,381.53
12,257,318.47
9,184,538.88
3,288,852.21
58,141,134.43
TSSBA Debt - Commercial Paper
The Tennessee State School Bond Authority issues commercial paper to finance costs of various capital projects during the construction phase. When projects are
placed in service, long-term, fixed-rate debt is issued by TSSBA to finance the project over its useful payback period and the commercial paper is redeemed. The
amount outstanding for projects at the university was $924,714.71at June 30, 2007, and $$4,047,249.31 at June 30, 2006.
For the commercial paper program, the Tennessee State School Bond Authority maintains an interest rate reserve fund. The university contributes amounts to the
reserve fund based on the amounts drawn. The principal of the reserve will be contributed to pay off notes or credited back to the university when the notes are
converted to bonds. The interest earned on the reserve is used to pay interest due during the month.
More detailed information regarding the bonds and commercial paper can be found in the notes to the financial statements in the financial report for the Tennessee State
School Bond Authority. That report may be obtained by writing to the Director of Bond Finance, Suite 1600, James K. Polk Building, Nashville, Tennessee 372430273, or by calling (615) 401-7872.
7.
Endowments
If a donor has not provided specific instructions to Tennessee State University, state law permits the university to authorize for expenditure the net appreciation
(realized and unrealized) of the investments of endowment funds. When administering its power to spend net appreciation, the university is required to consider
the university’s long-term and short-term needs, present and anticipated financial requirements, expected total return on its investments, price-level trends, and
general economic conditions. Any net appreciation that is spent is required to be spent for the purposes for which the endowment was established.
The university chooses to spend only a portion of the investment income each year. Under the spending plan established by the university , a scholarship is
awarded to a student whose residence is in the county specified by the donor has been authorized for expenditure. The remaining amount, if any, is retained to be
used in future years when the amount computed using the spending plan exceeds the investment income. At June 30, 2007, net appreciation of $ 38,601.56 is
35
available to be spent, of which $38,601.56 is included in restricted net assets expendable for scholarships and fellowships. At June 30, 2006, net appreciation of $
34,380.51 is available to be spent, of which $34,380.51 is included in restricted net assets expendable for scholarships and fellowships.
8.
Unrestricted Net Assets
Unrestricted net assets include funds that have been designated or reserved for specific purposes. These purposes include the following:
FY 2007
9.
FY 2006
Working Capital
Encumbrances
Designated Fees
Auxiliaries
Plant construction
Renewal and replacement of equipment
Unreserved/undesignated balance
$
1,405,459.74
2,642,040.89
1,034,293.74
2,766,203.68
13,119,214.85
7,869,539.93
422,020.01
$
1,758,810.71
2,145,551.86
921,699.19
2,766,203.68
7,291,573.23
7,973,257.30
522,158.31
Total
$
29,258,772.84
$
23,379,254.28
Pension Plans
Defined Benefit Plan
Plan Description – The university contributes to the State Employees, Teachers, and Higher Education Pension Plan (SETHEEPP), a cost-sharing multiple
employer defined benefit pension plan administered by the Tennessee Consolidated Retirement System (TCRS). TCRS provides retirement, death, and disability
benefits as well as annual cost-of-living adjustments to plan members and their beneficiaries. Title 8, Chapter 34-37, Tennessee Code Annotated, establishes
benefit provisions. State statues are amended by the Tennessee General Assembly.
The TCRS issues a publicly available financial report that includes financial statements and required supplementary information for SETHEEPP. That report may
be obtained by writing to the Tennessee Treasury Department, Consolidated Retirement System, 10th Floor Andrew Jackson Building, Nashville, TN 37243-0230
or by calling (615) 741-8202, extension 139.
Funding Policy – Plan members are noncontributory. The university is required to contribute at an actuarially determined rate. The current rate is 13.66% of
annual covered payroll. The contribution requirements of the university are established and may be amended by the TCRS Board of Trustees. The university
contributes to TCRS for the year ending June 30, 2007, and 2006, and 2005 were $3,928,524.36, $2,676,782.60, and $2,918,090.21, respectively, equal to the
required contributions for each year.
36
Defined Benefit Plan
Plan Description – The University contributes to the Federal Retirement Program, a cost-sharing multiple-employer defined benefit pension plan administered by
the Civil Service Retirement System (CSRS) for participants employed prior to January 1, 1984, and the Federal Employees Retirement System (FERS) for
participants employed after December 31, 1983. Both systems provide retirement, death, and disability benefits as well as annual cost-of-living adjustments to
plan members and beneficiaries. All regular full-time employees of the Tennessee State University Agricultural Extension Service who hold federal appointments
for 51% or more of their time are required to participate in either one of the two Federal Retirement Programs. For both systems, benefit provisions are
established in federal statutes. Federal statutes are amended by the U.S. Congress. All the university’s extension employees currently participate in CSRS.
The CSRS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by
writing to the Office of Personnel Management, Retirement Information Office, P.O. Box 45, Boyers, Pennsylvania, 16017-0045, or by calling (202) 606-0500.
Funding Policy – Participating employees and the university are required to contribute to the CSRS plan. Contribution requirements are established and may be
amended by federal statutes. The university was required to contribute 7% of covered payroll to the CSRS plan. Employees were required to contribute 7% of the
covered payroll. Contributions to CSRS for the year ended June 30, 2007, were $ 55,393.80, which consisted of $27,996.90 from the university and $ 27,396.90
from the employees; contributions for the year ended June 30, 2006, were $ 73,637.13, which consisted of $36,818.56 from the university and $ 36,818.57 from
the employees; contributions for the year ended June 30, 2005, were $ 73,788.36, which consisted of $38,321.09 from the university and $35,467.27 from the
employees. Contributions met the requirements for each year.
Defined Contribution Plans
Plan Description – The university/college/technology center contributes to three defined contribution plans: Teachers Insurance and Annuity Association-College
Retirement Equities Fund (TIAA-CREF), Aetna Life Insurance and Annuity Company, and Variable Annuity Life Insurance Company (VALIC). These plans are
administered by the Tennessee Department of the Treasury. Each plan provides retirement benefits to faculty and staff who are exempt from the overtime provisions of
the Fair Labor Standards Act and who waive membership in the TCRS. Benefits depend solely on amounts contributed to the plan plus investment earnings. Plan
provisions are established by state statute in Title 8, Chapter 35, Part 4, Tennessee Code Annotated. State statutes are amended by the Tennessee General Assembly.
Funding Policy – Plan members are noncontributory. The university contributes an amount equal to 10% of the employee’s base salary up to the social security wage
base and 11% above the social security wage base. Contribution requirements are established and amended by state statute. The contribution made by the
university/college/technology center to the plans for the year ended June 30, 2007, was $ 3,777,032.64 and for the year ended June 30, 2006, was $ 3,481,321.09.
Contributions met the requirements for each year.
10.
Other Post-Employment Benefits
The State of Tennessee administers a group health insurance program that provides post-employment health insurance benefits to eligible university retirees. This
benefit is provided by and administered by the State of Tennessee. The university center assumes no liability for retiree health care programs. Information related to
this plan is available at the statewide level in the Tennessee Comprehensive Annual Financial Report. That report may be obtained by writing to the Tennessee
Department of Finance and Administration, Division of Accounts, 14th Floor William R. Snodgrass Tennessee Tower, 312 Eighth Avenue North, Nashville, Tennessee
37243-0298, or by calling (615) 741-2140.
37
11.
Chairs of Excellence
The university had $ 4,464,260.35 on deposit at June 30, 2007, and $3,970,325.09 at June 30, 2006, with the State Treasurer for its Chairs of Excellence program.
These funds are held in trust by the state and are not included in these financial statements.
12.
Insurance-Related Activities
It is the policy of the state not to purchase commercial insurance for the risks of losses for general liability, automobile liability, professional malpractice, and workers’
compensation. The state’s management believes it is more economical to manage these risks internally and set aside assets for claim settlement in its internal service
fund, the Risk Management Fund. The state purchases commercial insurance for real property, flood, earthquake, and builder’s risk losses and surety bond coverage on
the state’s officials and employees. The Risk Management Fund is also responsible for claims for damages to state owned property up to the amount of the property
insurance aggregate deductible amount. The insurance policy deductibles vary from $25,000 per occurrence, depending on the type of coverage, to an aggregate of $5
million.
The university participates in the Risk Management Fund. The fund allocates the cost of providing claims servicing and claims payment by charging a premium to the
university based on a percentage of the university’s expected loss costs, which include both experience and exposures. This charge considers recent trends in actual
claims experience of the state as a whole. An actuarial valuation is performed as of fiscal year-end to determine the fund liability and premium allocation. Information
regarding the determination of the claims liabilities and the changes in the balances of the claims liabilities for the years ended June 30, 2007, and June 30, 2006, are
presented in the Tennessee Comprehensive Annual Financial Report. That report may be obtained by writing to the Tennessee Department of Finance and
Administration, Division of Accounts, 14th Floor William R. Snodgrass Tennessee Tower, 312 Eighth Avenue North, Nashville, Tennessee 37243-0298, or by calling
(615) 741-2140. Since the university participates in the Risk Management Fund, it is subject to the liability limitations under the provisions of the Tennessee Claims
Commission Act, Tennessee Code Annotated, Section 9-8-101 et seq. Liability for negligence of the university/college/technology center for bodily injury and
property damage is limited to $300,000 per person and $1,000,000 per occurrence. The limits of liability under workers’ compensation are set forth in Tennessee Code
Annotated, Section 50-6-101 et seq. Claims are paid through the state’s Risk Management Fund. The amount of cash and cash equivalents designated for payment of
claims held by the Risk Management Fund at June 30, 2007, was not available. At June 30, 2006, the Risk Management Fund held $133.2 million in cash and cash
equivalents designated for payment of claims.
At June 30, 2007, the scheduled coverage for the university was $289,328,000 for buildings and $64,969,100 for contents. At June 30, 2006, the scheduled coverage
for the university was $289,942,800 for buildings and $62,342,700 for contents.
The state has also set aside assets in the Employee Group Insurance Fund, an internal service fund, to provide a program of health insurance coverage for the
employees of the state with the risk retained by the state. The university participates in the Employee Group Insurance Fund. The fund allocates the cost of providing
claims servicing and claims payment by charging a premium to the university based on estimates of the ultimate cost of claims that have been reported but not settled
and of claims that have been incurred but not reported. Employees and providers have 13 months to file medical claims.
13.
Commitments and Contingencies
Sick Leave - The university records the cost of sick leave when paid. Generally, since sick leave (earned one day per month with unlimited accumulation) is paid only
when an employee dies or is absent because of illness, injury, or related family death, there is no liability for sick leave at June 30. The dollar amount of unused sick
leave was $31,174,320.88 at June 30, 2007, and $31,260,034.92 at June 30, 2006.
38
Operating Leases - The university has entered into various operating leases for buildings and equipment. Such leases will probably continue to be required. Expenses
under operating leases for real and personal property were $207,731.68, and $81,279.34 respectively for the year ended June 30, 2007. Comparative amounts for the
year ended June 30, 2006, were $236,656.87 and $306,091.61, respectively. All operating leases are cancelable at the lessee’s option.
Construction in Progress - At June 30, 2007, outstanding commitments under construction contracts totaled $3,141,754.88 for ADA Improvements, Agriculture
Extension I.T., Avon Williams Campus Improvements, Power Plant Mechanical Upgrade, Agriculture Extension Center, Research and Sponsored Programs Building,
McCord and Harned Halls Upgrade, Electrical Distribution System, Clement Hall/Allied Health Upgrade, Elliott Hall Exhibition, Student Housing Fire Suppression,
and Several Buildings Improvements of which $1,468,116.52 will be funded by future state capital outlay appropriations.
Contracts – In December 2004, the Tennessee Board of Regents system entered into a contract with Sundgard SCT for the purchase of a comprehensive enterprise
resource planning system. The contract includes a multi-year phase-in of administrative software for financial, human resource, and student systems. The university’s
outstanding liability for this contract is estimated as $1,716,427.00 at June 30, 2007.
Litigation - The university is involved in several lawsuits, none of which are expected to have a material effect on the accompanying financial statements.
39
14.
Natural Classifications with Functional Classifications
The university’s operating expenses by functional classification for the year ended June 30, 2007, are as follows:
Functional
Classification
Salaries
Benefits
Operating
Scholarship
Depreciation
Instruction
Research
Public Service
Academic Support
Student Services
Institutional Support
M&O
Scholarships & Fellowships
Auxiliary
Depreciation
$ 35,496,819.63
5,885,392.14
3,745,059.15
5,697,983.06
6,930,897.68
9,277,973.36
3,173,251.52
5,211.00
1,948,768.11
-
$ 9,868,520.66
1,704,959.40
1,447,927.50
1,781,330.45
2,258,106.40
3,289,476.45
1,403,838.76
398.63
611,614.32
-
$ 12,796,962.66
2,910,188.28
1,653,621.35
3,270,173.10
4,612,918.26
3,808,918.12
9,813,970.14
6,588,784.20
7,922,537.64
-
$1,164,524.21
114,121.91
26,891.91
53,838.33
1,069,496.27
9,331.87
2,864,445.90
61,610.92
-
$
$
Total
$ 72,161,355.65
$ 22,366,172.57
$ 53,378,073.75
$5,364,261.32
$8,256,427.97
$ 161,526,291.26
8,256,427.97
Total
59,326,827.16
10,614,661.73
6,873,499.91
10,803,324.94
14,871,418.61
16,385,699.80
14,391,060.42
9,458,839.73
10,544,530.99
8,256,427.97
The university’s operating expenses by functional classification for the year ended June 30, 2006, are as follows:
Classification
Salaries
Benefits
Operating
Scholarship
Depreciation
Total
Instruction
Research
Public Service
Academic Support
Student Services
Institutional Support
M&O
Scholarships & Fellowships
Auxiliary
Depreciation
$
34,882,934.34
5,730,464.12
3,753,208.60
5,669,220.42
6,700,774.01
9,247,266.72
3,052,793.06
4,346.80
1,908,826.57
-
$
9,647,076.79
1,678,070.61
1,300,289.92
1,780,074.12
1,968,810.55
3,097,985.54
1,272,949.51
901.67
595,969.90
-
$
11,085,519.13
5,245,364.39
1,240,223.71
3,679,305.82
4,484,221.62
2,089,038.24
5,547,200.59
5,009,018.88
7,751,626.33
-
$
2,211,797.86
280,107.87
84,360.25
109,000.82
2,215,132.90
10,853.00
1,335,283.36
175,202.00
-
$
8,037,721.55
$
Total
$
70,949,834.64
$
21,342,128.61
$
46,131,518.71
$
6,421,738.06
$
8,037,721.55
$ 152,882,941.57
40
57,827,328.12
12,934,006.99
6,378,082.48
11,237,601.18
15,368,939.08
14,445,143.50
9,872,943.16
6,349,550.71
10,431,624.80
8,037,721.55
15.
Component Unit(s)
Tennessee State University Foundation is a legally separate, tax-exempt organization supporting Tennessee State University. The Foundation acts primarily as a
fund-raising organization to supplement the resources that are available to the University in support of its programs. The 16-member board of the Foundation is
self-perpetuating and consists of graduates and friends of the University. The size of the board shall be determined by the majority vote of its members, and any
vacancy in its membership shall be filled in the same way. The entire membership of the Board of Trustees shall not exceed (25) in number and a minimum of
eight (8). All trustees shall serve until the expiration of their respective terms and until their respective successors are selected and qualified. Although the
University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and
invests are restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the
benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University‘s financial statements.
During the year ended June 30, 2007, the Foundation made distributions of $57,185.42 to or on behalf of the university for both restricted and unrestricted
purposes. During the year ended June 30, 2006, the Foundation made distributions of $80,102.97 to or on behalf of the university for both restricted and
unrestricted purposes. Complete financial statements for the Foundation can be obtained from Mr. Shereitte Stokes, Vice-President for University Relations and
Development, 3500 John A. Merritt Boulevard, Nashville, TN 37209.
Cash and Cash Equivalents – In addition to demand deposits and petty cash on hand, this classification includes instruments which are readily convertible to
known amounts of cash and which have original maturities of three months or less. At June 30, 2007, cash and cash equivalents consists of $1,411,430.61 in bank
accounts, $0.00 of petty cash on hand, $0.00 of certificates of deposit, $.00 in the State of Tennessee Local Government Investment Pool administered by the State
Treasurer, and $4,483,640.78 in money funds and short term investments. At June 30, 2006, cash and cash equivalents consists of $969,376.50 in bank accounts,
$0.00 of petty cash on hand, $0.00 of certificates of deposit, $189.48 in the State of Tennessee Local Government Investment Pool administered by the State
Treasurer, and $7,227,121.53 in money funds and short term investments.
Investments – The Foundation is authorized to invest funds in accordance with its board of directors’ policies. All investments permitted to be reported at fair
value under GASB Statement 31 are reported at fair value, including those with a maturity date of one year or less at the time of purchase.
As of June 30, 2007, the Foundation had the following investments and maturities.
41
Investment Maturities (In years)
US Treasury
US Agencies
Corporate stock
Corporate bonds
Mutual bond funds
Mutual equity funds
Real Estate Investments
Mutual funds
Other:
Money fund and short term investments
$
Fair Value
2,124,240.72
1,014,405.65
2,901,962.16
853,228.79
6,983,840.28
2,710,528.08
2,729,192.00
8,570,147.47
$
Less than 1
49,648.45
49,628.70
1 to 5
$ 1,773,503.43
267,100.13
6 to 10
$ 228,764.82
-
More than 10
$
72,324.02
697,676.82
69,861.96
659,815.23
106,154.96
17,396.64
No maturity date
2,901,962.16
6,983,840.28
2,710,528.08
2,729,192.00
8,570,147.47
4,483,640.78
Less amount reported as cash and cash equivalents:
Money fund and short term investments
(4,483,640.78)
Total
$ 27,887,545.15 $
4,483,640.78
(4,483,640.78)
169,139.11
$ 2,700,418.79
$ 334,919.78
$
787,397.48
$
23,895,669.99
As of June 30, 2006, the Foundation had the following investments and maturities.
Investment Maturities (In years)
US Treasury
US Agencies
Certificates of deposit
Corporate stock
Corporate bonds
Mutual bond funds
Mortgage Backed Securities
Equity Stock
Real Estate Shares
Real Estate Holdings
Other:
Money fund and short term investments
$
Fair Value
318,739.30
603,649.79
111,162.16
705,019.81
3,208,371.04
2,462,110.31
198,073.26
7,411.53
1,900,991.30
1,670,446.25
Less than 1
37,487.76
1 to 5
48,531.25
553,516.69
73,674.40
323,287.61
2,478,990.60
$
6 to 10
More than 10
$ 270,208.05
No maturity date
50,133.10
-
705,019.81
406,092.83
198,073.26
2,462,110.31
7,411.53
1,900,991.30
1,670,446.25
7,227,121.53
Less amount reported as cash and cash equivalents:
Money fund and short term investments
(7,227,121.53)
Total
$ 11,185,974.75 $
7,227,121.53
360,775.37
42
$ 3,154,712.94
$ 456,225.93
$
468,281.31
$
(7,227,121.53)
6,745,979.20
Interest Rate Risk. The Foundation does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value arising
from increasing interest rates.
Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Securities are rated using Standard and Poor’s,
Moody’s, and/or Fitch’s and are presented below using the Standard and Poor’s rating scale. The Foundation has no investment policy limiting its investment choices
based on ratings issued by nationally recognized statistical rating organizations . As of June 30, 2007, the Foundation’s investments were rated as follows:
Credit Quality Rating
Investment Type
US Agencies
Corporate Bonds
Mutual Bond Funds
Mutual Funds
Total
Fair Value
AAA
1,014,405.65
853,228.79
6,983,840.28
8,570,147.47
$ 17,421,622.19 $
AA
97,397.95
85,960.74
183,358.69 $
A
123,160.41
123,160.41
BBB
342,561.90
$
342,561.90
Unrated
35,105.51
$
35,105.51
$
917,007.70
266,440.23
6,983,840.28
8,570,147.47
16,737,435.68
As of June 30, 2006, the Foundation’s investments were rated as follows:
Credit Quality Rating
Investment Type
Local Government Investment Pool (LGIP)
US Agencies
Corporate Bonds
Mutual Bond Funds
Collateralized mortgage obligation
Total
Fair Value
$
$
189.48
603,649.79
3,208,371.04
2,462,110.31
198,073.26
6,472,393.88 $
AAA
AA
553,516.69
91,511.99
50,133.10
328,807.12
645,028.68 $ 378,940.22 $
A
2,623,809.57
2,623,809.57 $
BBB
BB
Unrated
$
189.48
$
2,462,110.31
198,073.26
2,660,373.05
164,242.36
164,242.36 $
-
Concentration of Credit Risk. The Foundation places no limit on the amount it may invest in any one issuer. More than 5 percent of the Foundation’s investments are
invested in the following single issuers at June 30, 2007:
Issuer
Amsouth Bank
Charles Schwab International
Percentage of Total Investments
23%
61%
Diversified Trends
6%
43
More than 5 percent of the Foundation’s investments are invested in the following single issuers at June 30, 2006:
Issuer
AmSouth Bank
Charles Schwab International
Diversified Trends
Inland American
Percentage of Total Investments
19%
59%
7%
6%
Endowments - If a donor has not provided specific instructions to Tennessee State University Foundation, the foundation’s policies and procedures permits it to
authorize for expenditure the net appreciation (realized and unrealized) of the investments of endowment funds. When administering its power to spend net
appreciation, the foundation is required to consider the foundation’s long-term and short-term needs, present and anticipated financial requirements, expected total
return on its investments, price-level trends, and general economic conditions. Any net appreciation that is spent is required to be spent for the purposes for which
the endowment was established.
The foundation chooses to spend only a portion of the investment income (including changes in the value of investments) each year. Under the spending plan
established by the foundation, cost of operating Tennessee State University including general operating cost and maintenance costs, and cost for administrating
and managing the endowment fund has been authorized for expenditure. For Title III funds, the TSU Foundation must reinvest a minimum of 50% of the annual
income generated by the fund. For the Consent Decree Fund, the TSU Foundation must reinvest a minimum of 25% of the annual income and may spend up to
75% of the annual income generated by the fund with all disbursement decisions made by the sole discretion of the Budget Committee established by the Trust
Agreement. At June 30, 2007, net appreciation of $687,930.12 is available to be spent, of which $687,930.12 is included in restricted net assets expendable for
scholarships and fellowships. At June 30, 2006, net appreciation of $ 309,929.91 is available to be spent, of which $309,929.91 is included in restricted net assets
expendable for scholarships and fellowships.
44
TSU Foundation
Supplementary Information
Unaudited Statement of Cash Flows - Component Unit
for the Year Ended June 30, 2007, with comparative figures for the year ended June 30, 2006
Component Unit
FY 2007
FY 2006
CASH FLOWS FROM OPERATING ACTIVITIES
Gifts and contributions
Payments to suppliers and vendors
Payments for scholarships and fellowships
Payments to (institution name)
Other receipts (payments)
Net cash provided (used) by operating activities
$
1,171,729.51
(501,520.37)
(362,724.30)
(57,185.42)
191,920.79
$
887,706.15
(459,267.94)
(605,975.24)
(80,102.97)
178,318.08
$
442,220.21
$
(79,321.92)
$
9,000,000.00
3,259,354.58
288,401.94
1,960,699.30
$ 1,000,000.00
214,669.78
-
$ 14,508,455.82
$ 1,214,669.78
$
$ 4,883,872.80
593,564.34
(4,382,649.57)
(127,764.49)
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES
State appropriations
Gifts and grants received for other than capital or endowment purposes
Private gifts for endowment purposes
Other non-capital financing receipts (payments)
Net cash provided (used) by non-capital
financing activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales and maturities of investments
Income on investments
Purchase of investments
Other investing receipts (payments)
7,347,497.90
1,409,977.55
(26,009,767.60)
-
Net cash provided (used) by investing activities
$ (17,252,292.15)
$
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents - beginning of year
Cash and cash equivalents - end of year (Note 15 )
(2,301,616.12)
8,196,687.51
$ 5,895,071.39
2,102,370.94
6,094,316.57
$ 8,196,687.51
45
967,023.08
TSU Foundation
Supplementary Information
Unaudited Statement of Cash Flows - Component Unit
for the Year Ended June 30, 2007, with comparative figures for the year ended June 30, 2006
Component Unit
FY 2007
FY 2006
RECONCILIATION OF OPERATING INCOME/(LOSS) TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES
Operating income/(loss)
Adjustments to reconcile operating loss to net cash
provided (used) by operating activities:
Change in assets and liabilities:
Receivables, net
Accounts payable
Net cash provided (used) by operating activities
The notes to the financial statements are integral part of this statement.
46
$
434,039.49
$
8,180.72
442,220.21
$
(53,219.08)
$
(31,000.00)
4,897.16
(79,321.92)